Nasdaq to Exit Energy Futures
November 12 2019 - 10:58AM
Dow Jones News
By Alexander Osipovich
Nasdaq Inc. said it has agreed to sell its struggling
energy-futures business, NFX, to a unit of German exchange group
Deutsche Börse, giving up on its four-year effort to break into
commodities.
NFX's core assets -- including its oil, gas, electricity, metals
and freight futures markets -- will be transferred to Deutsche
Börse's energy arm, EEX Group, by 2020 as part of the transaction,
Nasdaq and EEX said in a joint statement Tuesday. The terms of the
deal weren't disclosed.
Nasdaq launched NFX with much fanfare in 2015, in a bid to grab
market share from the two giants that dominate U.S.
commodity-futures trading, CME Group Inc. and Intercontinental
Exchange Inc., known as ICE.
Nasdaq's chief executive at the time, Robert Greifeld, said his
company would challenge a "monopolistic environment" in energy
trading by undercutting CME and ICE on trading fees by as much as
50%. NFX launched futures contracts that were identical to existing
futures on U.S. natural gas, Brent crude oil and other products at
CME and ICE, except that they were settled through cash payments
rather than physical delivery of the commodity.
But it has historically been difficult for a rival futures
exchange to enter a market already controlled by an incumbent
because there is no simple mechanism for traders in the established
exchange to shift their activity over to the new marketplace.
In the first six months of 2019, about 4.5 million contracts
changed hands at NFX, down 65% from the same period a year earlier,
according to data from FIA, an industry group.
By comparison, CME's energy-focused subsidiary -- -the New York
Mercantile Exchange -- had total volume of 303 million contracts in
the first half of 2019, down 11% from the year-ago period.
"Nasdaq entered the U.S. futures marketplace in response to
clients who wanted to develop new ways to innovate around energy
and freight trading, " Kevin Kennedy, senior vice president of
North American market services at Nasdaq, said in the
statement.
"After evaluating the steady progress we made to expand our
client base and grow open interest, the next step forward is for
EEX and Nodal to continue this mission," he added, referring to
EEX's U.S. unit, Nodal Exchange.
The NFX sale is the latest move by Nasdaq CEO Adena Friedman to
exit underperforming businesses launched by her longtime
predecessor, Mr. Greifeld. Ms. Friedman, who became CEO in January
2017, has been pivoting Nasdaq from running markets to more
profitable business in data and technology.
Nasdaq at one point explored the possibility of launching
bitcoin futures on NFX, but never carried out the plan.
EEX Group, which owns several European exchanges, has been
building out its global presence in recent years. In 2017, it
acquired Nodal Exchange, a U.S. futures exchange specializing in
electricity.
Nodal, which handles about 44% of the U.S. power futures market,
will acquire NFX's electricity, and U.S. natural gas futures
businesses as part of the deal.
Write to Alexander Osipovich at
alexander.osipovich@dowjones.com
(END) Dow Jones Newswires
November 12, 2019 10:43 ET (15:43 GMT)
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